TSM 2026 Q3

Q3 revenue of $46.7 billion came in above the high end of guidance, driven by strong leading-edge demand, beating the company's own prior expectation for the quarter.

“In U.S. dollar terms, revenue increased 16.2% sequentially to $46.7 billion, above the high end of our third-quarter guidance.”— Wendell Huang, CFO

Management raised its full-year 2026 revenue growth outlook to around 44% year over year in USD terms, an updated figure reflecting robust leading-edge and AI-related demand.

“we now expect our full-year 2026 revenue growth to be around 44% year over year in U.S. dollar terms.”— C.C. Wei, Chairman and CEO

Management indicated AI-related demand is running ahead of the previously communicated mid-to-high-50s percent AI accelerator revenue CAGR (2024-2029), signaling the growth rate could now be higher than guided.

“Whether it is a high-50s CAGR, it does not matter. It probably will be higher.”— C.C. Wei, Chairman and CEO

Demand from agentic AI CPUs is described as a newly strengthening trend, continuing to increase as adoption of agentic AI expands beyond traditional accelerators.

“we did see demand from agentic AI CPUs continue to increase. Yes, that is a trend today.”— C.C. Wei, Chairman and CEO

Volume production at the second Arizona fab is now scheduled for Q3 2027, slightly ahead of the company's previous schedule, reflecting accelerated overseas capacity build-out.

“Volume production will begin in the third quarter of 2027, slightly ahead of our previous schedule.”— C.C. Wei, Chairman and CEO

TSMC is now evaluating a new U.S. site in Texas beyond Arizona and discussing a potential capacity arrangement with a customer building its own fab, a new expansion avenue not previously disclosed.

“Recently, we did expand our capacity considerations to see whether, outside Arizona, we can get another chance to expand our capacity.”— C.C. Wei, Chairman and CEO

N2 annual capacity is now expected to more than double in 2027, an acceleration driven by strong smartphone and HPC/AI demand for the new node.

“We expect our N2 family technologies' annual capacity to more than double in 2027, supported by strong demand from both smartphone and HPC AI applications.”— C.C. Wei, Chairman and CEO

Customer engagement for the upcoming A14 node is now running higher than N2 saw at the same stage, leading management to expect A14 to become a bigger node than N2.

“We expect A14 to be a bigger node than our current N2 technologies.”— C.C. Wei, Chairman and CEO

Q3 gross margin declined 1.3 points sequentially to 66.4%, a reversal from prior improvement, driven by dilution from the initial 2nm ramp.

“Gross margin decreased by 1.3 percentage points sequentially to 66.4%, primarily due to margin dilution from the 2 nm ramp.”— Wendell Huang, CFO

Q4 gross margin is guided down another 40bps to 66% at midpoint, as 2nm ramp dilution continues and overseas fab dilution adds further pressure, partly offset by cost improvements.

“primarily due to the continued margin dilution from the steep ramp-up of our 2 nm technology”— Wendell Huang, CFO

Current overseas fab margin dilution is now expected to be closer to 2%, an improvement versus prior assumptions, aided by growing scale and cost-improvement efforts.

“we now expect the gross margin dilution from the ramp-up of our overseas fabs to be closer to 2%.”— Wendell Huang, CFO

Overseas fab dilution is expected to widen to 3%-4% in the next few years as more fabs ramp in the U.S. to meet structural demand, a worsening versus the current ~2% level.

“we expect the dilution from our overseas fabs to widen to 3%–4% in the next few years.”— Wendell Huang, CFO

TSMC newly announced a back-end supply deal with GlobalFoundries for silicon interposers to address a back-end packaging capacity shortage and support customer product introductions.

“We designed a deal with GlobalFoundries, and this is part of our overall strategy in back-end supply.”— C.C. Wei, Chairman and CEO

Breaking from its historical practice of not adding capacity to a node once it reaches target capacity, TSMC is now adding three new fabs for 3nm due to robust multi-year demand.

“we are executing well on our global capacity plan to add three new fabs”— C.C. Wei, Chairman and CEO

Management now flags that consumer and price-sensitive end markets are being challenged by rising component prices and macro uncertainty, prompting a more prudent approach to 2027 planning versus prior commentary.

“we continue to observe that consumer and price-sensitive end-market segments are being challenged due to the impact of rising component prices and macroeconomic uncertainties.”— C.C. Wei, Chairman and CEO